Bloomberg: Appaloosa's Tepper Says Stock Markets Not in Bubble
Tepper was the highest paid hedge fund manager in 2012 and he is known for making sound market calls. Head over here for the full interview.
1) The market is not in a bubble. He uses S&P and Nasdaq forward P/E multiple to illustrate his point. The below chart shows the P/E multiple (not forward) of S&P500 which has rallied from 17x (1995) to 31x (2000) pre-Internet bubble. Now post-GFC 2008, the market's P/E has been in range bound between 10x to 18x, still well below an implied P/E multiple of 25x.
2) Tepper owns s large position in airline stocks which have performed well for his fund.
3) The taper may just provide a knee-jerk drop of 5% to 10% in the market given the stronger underlying U.S. GDP growth next year.
4) He still owns U.S. and European banks.
5) Tepper opined that long/short equity funds are in precarious position given they are only net long 60%, not pure long, only of 100% which he thinks L/S funds cant get long enough.
Given Tepper's stellar performance, his words do provide a prescient call.